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Compliance and Fraud Resources

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Seven Charged in Fraud Scheme Involving More Than 100 California Properties

By James Comtois

Seven individuals have been charged for their roles in a mortgage fraud scheme that involved more than 100 properties in Northern California. The indictment charges Amy Schloemann, Karim Akil, Wonda Louise Kidd, Michelle McGuire, Kaska Clay, James Ross and Darnell Thomas with conspiracy to commit wire fraud, wire fraud and money laundering.

According to Joseph P. Russoniello, U.S. attorney for the Eastern District of California, the defendants, who were unavailable for comment, allegedly participated in a fraud scheme involving the purchase of more than 100 properties through the use of straw buyers, real estate appraisers, notaries and escrow agents and the laundering of profits.

The defendants allegedly directed straw buyers to sign loan applications containing false information and allegedly hired notary publics to fraudulently notarize documents. The defendants allegedly increased their profits on the purchase of properties by submitting false documents to lenders. Once the properties were purchased, the defendants allegedly split the proceeds and failed to make payments on the properties, causing lenders to foreclose.

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Wolters Kluwer Enhances Anti-Fraud Tool's Investigative Services Functionality

By James Comtois

As a means to help U.S. and U.K. financial institutions more effectively prevent financial crimes and the resulting losses before they occur, Wolters Kluwer Financial Services has enhanced the investigative services functionality of its Wiz Sentri: Anti-Fraud software. The software facilitates fraud prevention by helping institutions detect the actual precursors to a fraudulent attack via continuous, real-time monitoring of both activity and behavior.

The Wiz Sentri: Anti-Fraud software's new relationship analysis capabilities enable fraud investigators at institutions to quickly uncover correlations between customers, their accounts and employees that may be involved in or impacted by a criminal scheme.

Wiz Sentri: Anti-Fraud is designed to leverage the network surveillance technology of Intellinx to help institutions combat financial crimes and manage operational risk. Wiz Sentri: Anti-Fraud was also created to yield shorter implementation times and a better ability for mortgage professionals to detect suspicious behavior and prevent associated financial crimes before they occur.

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Voice of the Industry

The Gold Rush of 2010

Perspectives by Ann Fulmer

I was recently asked by some closing attorneys to help explain the difference between legal and illegal conduct in short sales. I can see why there is some confusion: Short sale flips are today's equivalent of the California Gold Rush. But this time, in addition to the prospectors, snake oil salesmen and hucksters trying to cash in on the action, a lot of refugee fraudsters from the subprime mortgage sector are going along for the ride.

Today's potential "gold" prospectors often turn to the Internet where a Google search for "short sale" and anything related to flipping or "no money down" returned 776,300 pages of advice and commentary. A search for "short sales" and "proof of funds" turned up 238,000 pages, some with cross references to "credit enhancement."

Search for "transactional financing" or "one day" loans and there are nearly 300,000 pages to choose from. And there are over 30 million pages from various gurus and authors whose clubs, books and courses will teach you the secret techniques "the banks don't want you to know" that will allow you to make "$10,000, $20,000, or even $30,000 every month!"

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Legal Corner

By Herman Thordsen

HUD/RESPA SAYS WE WILL EXERCISE RESTRAINT IN ENFORCING THE NEW RULE FOR THE FIRST 120 DAYS BUT -- AND I DO MEAN BUT--IT IS STILL THE LAW

FACTS

On Nov. 13, 2009 the U.S. Department of Housing and Urban Development announced that for the first four months of 2010, the staff of the Mortgagee Review Board will exercise restraint in enforcing new regulatory requirements under the Real Estate Settlement Procedures Act, due to take full effect on Jan. 1, 2010. The MRB instructed its staff to exercise such restraint in considering an action against FHA-approved lenders who have demonstrated that they are making a good faith effort to comply with RESPA's new requirements.
HUD is also asking other federal and relevant state enforcement agencies to exercise the same 120-day restraint in enforcement for non-FHA originators and other settlement service providers who demonstrate the good faith effort to implement RESPA's new rules.
In determining whether a mortgagee has made a good faith effort, MRB staff will consider whether the mortgagee has relied on the new RESPA rule and other written guidance issued by the Department, and the extent to which the mortgagee has made sufficient investment and commitment in technology, training, and quality control designed to comply with the new rule.
On Jan. 1, 2010, HUD will require that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs. Closing agents will also be required to provide borrowers a new HUD-1 Settlement Statement that clearly compares consumers' final and estimated costs. The new RESPA rule became effective on Jan. 16, 2009, but provided a one-year transition period for the mortgage industry to incorporate these changes. HUD will continue to work with the mortgage industry during this period, including providing a comprehensive set of frequently asked questions (FAQs) on its website. (hud no. 09-215, 11-13-09)

MORAL

Be very, very careful here.  HUD is not saying it will not enforce the new GFE and the new HUD-1. It is saying we will take into consideration your mistakes if you are attempting to comply in good faith. In other words you still have to do it, or else!
Notice there is nothing in the above press release from HUD that states it will not enforce the new GFE and HUD-1. It only says that if HUD wants to discipline you for not using it properly, it will consider whether you attempted to use them in good faith.

FBI ADDS "SHORT SALE FLIPPING" TO ITS LIST OF RECOGNIZED MORTGAGE FRAUD SCENARIOS

FACTS

The FBI recently added short sale flipping, dubbed "flopping" by some mortgage fraud experts, to its list of recognized real estate fraud. Fraud experts warn that some of the real estate flipping they see today involves the same kind of insider deals and manipulated sale prices that plagued the housing bubble.

In a June 2009 report on mortgage fraud, FBI officials described various forms of short sale flipping fraud. Each type involves misrepresenting the value of a house to a lender. Banking experts point out that those losses trickle down to taxpayers, who have bailed out the banking industry. (hertrib.comfl111509)